By: Sachin Sandhir, Managing Director, RICS South Asia
“For the real estate and housing sector, this years’ budget has exceeded expectations given the pressure on fiscal situation. Most importantly, it has taken into account the crying need to focus on affordable housing sector by allowing ECB for low cost housing, road as well as construction. Withholding tax on ECBs for affordable housing has been reduced from 20% to 5% for 3 years and this move will help ease the liquidity in the sector. Also, investment linked deduction of capital expenditure in affordable housing is proposed to be provided at 150% as opposed to 100%. All these measures will encourage supply of low cost housing. For the home buyer, the 1% interest subsidy scheme has not been rolled back, however there were expectations of the increasing the subsidies through this scheme. Participation of FII’s to grow corporate bond markets is also a very positive development and will open up the opportunities for real estate companies.
Country needs infrastructure growth and the budget has not disappointed on this front as well. The doubling of allocation in infrastructure debt fund through allocation to NHDP, IIFCL, NHB and SIDBI coupled with full exemption from basic customs duty for equipment for road and highway construction are likely to boost infrastructure and construction sectors. Further measures such as credit guarantee & direct transfer of subsidy likely to change growth environment. One year extension of sun set clause on tax incentives for infra projects under 80 IA is also a welcome step.
While construction sector will benefit from higher allocation in infrastructure and investment linked deductions, the increase in excise duty will result in cement prices going up by Rs 4-5 per bag which will hurt profitability of construction companies and have a negative impact on affordability.”
